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The Deal: Rules and Derivatives Moves Helped Do In Summers

More recently, opponents on the left have raised concern with Summers' role as director of the Obama administration's National Economic Council in the period immediately after the height of the financial crisis. Donald Lamson, partner at Shearman & Sterling LLP in Washington, said Summers' "perceived friendliness" to banks during the crisis contributed to criticism about him.

As the prospect of the Obama administration nominating Summers increased in recent weeks, opposition on Capitol Hill surged as well. At least four Democrats on the all-important Senate Banking Committee indicated they would oppose him. Summers would have had to survive a contentious nomination hearing and vote of the Senate Banking Committee. Had he survived that, the next step would have been to obtain the filibuster-proof 60 votes needed to be approved by the full Senate, a prospect that also required some Republican support, especially with a handful of Democrats in opposition.

Sen. Jon Tester, a moderate Democrat on the banking panel, indicated that he was opposed late last week, adding his name to three other more left-leaning Democratic opponents. The opposition by Tester may have been a tipping point, Boston University's Hurley noted. "That had to hurt," he added.

Another key factor in Summers unraveling was the backing by a number of Democratic lawmakers of Janet Yellen, the Fed's current vice chairman, for the top Fed job. A group of senators, including Sen. Jack Reed, Democrat of Rhode Island and a member of banking panel, recently signed a letter pushing for Yellen to take the job, according to a person familiar with the letter.

Nevertheless, it is unclear whether Obama will ultimately pick Yellen. Many believe that she will likely be nominated. Brian Gardner, an analyst at Keefe, Bruyette & Woods Inc., notes that many of the activist groups that opposed Summers support Yellen, indicating to him that she "is the likely nominee."

However, some observers contend that Obama may not want to appear as if he has caved in to congressional Democrats and therefore he will try to find someone else.

Other possible candidates include former Treasury Secretary Timothy Geithner; Donald Kohn, who was the central bank's vice chairman until 2010; and Roger Ferguson, also a former Fed vice chairman and now chief executive of the public pension fund TIAA-Cref. Other names bandied about include former White House adviser Christina Romer and Stanley Fischer, who previously was chief of the Bank of Israel. Current Fed chairman Ben Bernanke could also stay on for another term.

-- Written by Ronald D. Orol in Washington
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